Economist Adam Smith was onto something when he spoke of the beneficial “invisible hand” of the market. He pointed out that individuals making voluntary buying, selling and other economic decisions will naturally create the most efficient allocation of resources in a society. That is markedly different from a government-controlled or “command” economy, which creates shortages and massive inefficiencies.
But because of the “invisible” nature of the positive workings of free markets, it’s easy to be unaware of them.
For instance, some Americans think government should subsidize costly alternative energy such as wind and solar. They say that is necessary because eventually the world will run out of oil — and then where will we be? But that ignores the fact that the American people, making voluntary purchasing decisions, are perfectly capable of responding to diminishing oil and gasoline supplies.
As a fairly mundane example, a recent McClatchy Newspapers article noted that in response to rising gas prices, many Americans are driving less or altering their driving habits in some other way. Some may buy more fuel-efficient vehicles or carpool to work. Others may walk or bicycle short distances rather than drive.
The point is, people who are blessed to live in countries with free markets are not helpless victims of economic forces. They can choose to live more thrifty lives, and they can reward companies that sell efficient goods and services. Those choices are curtailed when government believes it knows best and decides to prop up this or that sector of the economy with subsidies and the like.
What is lost on those who demand things such as alternative energy subsidies is that once oil gets so costly that wind and solar are cost competitive, there will be natural, free-market pressure to develop those energy sources — without any need for unconstitutional subsidies. Falling supplies of one type of energy will increase demand for another. That will create a financial incentive for go-getting engineers and entrepreneurs to “build a better mousetrap” — or in this case, to find ways to make alternative energy more practical.
The “invisible” free-market choices that millions of Americans make every day are a far surer path to economic growth and energy efficiency than any top-down interference by government bureaucrats could ever be.